TMI Blog2024 (4) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, the decision of the Hon ble jurisdictional High Court in the case of Arvind Lifestyle Brands Ltd. (supra), holding second proviso to Section 40(a)(ia) of the Act to have retrospective effect, was the interpretation of law in the jurisdiction of Gujarat as it always was. The assessee was well within its right to have sought the benefit of this second proviso for the impugned year, i.e. AY 2005-06 as it was applicable for the impugned year also as per the decision of the Hon ble jurisdictional High Court. The application, therefore, filed by the assessee seeking the benefit of the second proviso, therefore, clearly pointed out a mistake which was apparent from record on account of the denial of benefit of the said proviso to the assessee. As rightly pointed out by assessee, courts have repeatedly held that if an assessee under a mistake/misconception is over-assessed, the authorities under the Act are required to assist him and ensure that only the legitimate taxes due are collected, S.R Koshti [ 2004 (12) TMI 62 - GUJARAT HIGH COURT] - The application, therefore, filed by the assessee u/s 154 of the Act seeking the benefit of the second proviso to Section 40(a)(ia) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A)-NFAC erred on facts and in law in confirming demand of Rs. 99,02,550/- including interest u/s 234B of Rs. 16,86,412/-and u/s 234D of Rs. 2,95,121/- imposed on the appellant by the Assessing Officer while disposing off rectification application. 3. The issue in the present appeal relates to rectification sought by the assessee by moving an application u/s 154 of the Act which was rejected consistently, both by the Assessing Officer and in first appeal by the ld. CIT(A), holding that the rectification sought was not amenable in terms of Section 154 of the Act since it was not in relation to a mistake apparent from the record. The rectification sought by the assessee was to the effect that the amount of disallowance made u/s 40(a)(ia) of the Act to the tune of Rs. 2,30,59,781/- be allowed in terms of second proviso to Section 40(a)(ia) of the Act. 4. The facts leading to the impugned rectification application are that the assessee had filed return of income for the impugned Assessment year 2005- 06 declaring total income of Nil. Assessment was framed u/s 143(3) of the Act making addition of Rs. 36,81,88,843/- u/s 40(a)(ia) of the Act on account of disallowance of the said expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision so amended reads as under:- (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or; after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139 Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. The second proviso, as per which the assessee sought relief by way of rectification application filed under Section 154 of the Act, was inserted by Finance (2) Act, 2012, with effect from 01.04.2013. The said proviso reads as under:- Provided further that where an assessee fails to deduct the whole or any part of the tax in accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would content that the benefit of this proviso would be available to the assessee only prospectively w.e.f. 1.4.2013. Various Courts, however, have seen this proviso as beneficial to the assessee and curative in nature. The leading judgment on this point was of the Division Bench of Delhi Court in the case of CIT Vs. Ansal Land Mark Township P Ltd [2015] 377 ITR 635 (Delhi) . The Court held that Section 40(a)(ia) is not a penalty and insertion of second proviso is declaratory and curative in nature and would have retrospective effect form 1.4.2005 i.e the date from the main proviso 40(a)(ia) itself was inserted. Several High Courts have adopted the same lines. We may also note that the Supreme Court in the case of Hindustan Coca Cola Beverages P Ltd Vs. CIT [2007] 293 ITR 226 (SC) even in absence of second proviso to Section 40(a)(ia) had noticed that the payee had already paid the tax. Under such circumstances, the Court held that the payer / deductor can at best be asked to pay the interest on delay in depositing tax. 3. Under such circumstances , no question of law arises. Tax appeal is dismissed (ii) PCIT Vs. Arvind Lifestyle Brands Ltd, R/Tax Appeal No. 539 of 2019, order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment brought in the explanation. However, this claim of the assessee did not find favour with the A.O. who was of the firm belief that the amendment is applicable from A.Y.201314 onwards and accordingly made the disallowance of interest. 6. Assessee carried the matter before the ld. CIT(A) but without any success. Before us, the ld. counsel for the assessee stated that the issue is no more res integra as the Hon'ble High Court of Delhi has held that applicability of second proviso to Section 40(a)(ia) has retrospective effect. Per contra, the ld. D.R. Drew our attention to the Departmental view of CBDT vide Circular No.10/DV/2013 dated 16.12.2013. It is the say of the ld. D.R. That in the light of the said Circular, the disallowance made by the A.O. and confirmed by the ld. CIT(A) should be upheld. 7. We have given a thoughtful consideration to the orders of the authorities below and have carefully considered the rival contentions. At the very outset, we have to say that the reliance on the Circular by the D.R. is misplaced as that Circular refers to the decision of the Tribunal Special Bench, Vishakhapatanam in the case of Merilyn Shipping Transports Vs. Addl. CIT. The Circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same has been filed within time and is otherwise in order. Where any such applications have already been rejected and the assessee files fresh applications within the statutory time limit, the same may also be treated on par with the applications which may either be pending or received after the issue of this circular. 2. The Board desire that any appeals or references pending on the point at issue may please be withdrawn. Reliance was also placed on the following decision B.V.K. Seshavataram Vs. CIT, 210 ITR 633 (AP) Section 256(1) , read with section 32(1)(iv) of the Income-tax Act, 1961 - Reference to High Court - Question of law - Assessment years 1981-82, 1982-83 and 1984-85 to 1987-88 - Whether a subsequent decision of Supreme Court can validly form basis for rectifying an order of assessment under section 154 - Held, yes (c) Our attention was also drawn to the decision of the Hon ble jurisdictional High Court in the case of SR Koshti Vs. CIT, [2005] 146 Taxman 335 (Guj.) for the proposition that tax can be collected only as provided under the Act and if an assessee, under a mistake, misconception or on not being properly instructed, or over-assessed, the authorities under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that assessee had not claimed exemption during filling of return - Whether even if assessee had not claimed exemption in his return of income, he could claim same later in point of time - Held, yes - Whether, thus, assessee was to be allowed exemption under section 10(10C) on such amount received from bank under early retirement scheme - Held, yes [Paras 9 and 11] [In favour of assessee] (e) For the direct proposition applicable on this issue that, in view of the amended provision of Section 40(a)(ia) of the Act the assessee who had deposited TDS in Government account after end of the relevant year but before the due date of filing of the return of income, he was entitled to seek rectification of order passed by the Assessing Officer making disallowance u/s 40(a)(ia) of the Act, reliance was placed on the decision of the jurisdictional High Court in the case of PCIT vs. Jigna Construction, [2016] 75 taxmann.com 58 (Guj.) Section 40(a)(ia), read with sections 154 and 264, of the Income-tax Act, 1961 - Business disallowance - Interest, etc., paid to a resident without deduction of tax at source (Deposit of tax) - Whether in view of amended provision of section 40(a)(ia), assessee wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retrospective effect, finding it to be curative in nature. The Revenue has not controverted this position of law as laid down by the Hon ble jurisdictional High Court. The law as interpreted by the Hon ble High court has binding force within its jurisdiction and is the final word on law in its particular jurisdiction until overturned by a contrary decision of the hon ble apex court. Therefore, the decision of the Hon ble jurisdictional High Court in the case of Arvind Lifestyle Brands Ltd. (supra), holding second proviso to Section 40(a)(ia) of the Act to have retrospective effect, was the interpretation of law in the jurisdiction of Gujarat as it always was. Even the Hon ble High court of Bombay in the case of Perfect Circle (supra) held the proviso to be applicable with retrospective effect. The Revenue was unable to point out any contrary decision of either any High Court or the Hon ble apex court. Therefore, the assessee was well within its right to have sought the benefit of this second proviso for the impugned year, i.e. AY 2005-06 as it was applicable for the impugned year also as per the decision of the Hon ble jurisdictional High Court. The application, therefore, filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the basis of such statutory change and the judgement of the High Court, the assessee was, as held by the Supreme Court in case of Asstt. CIT v. Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 227/173 Taxman 322, entitled to seek rectification. The Tribunal correctly granted such a relief which was denied by the Assessing Officer and Commissioner (Appeals). The Commissioner (Appeals) was not correct in holding that no appeal against the order passed by the Assessing Officer under Section 154 of the Act would be maintainable. The order of the Assessing Officer was passed dealing with the assessee's application for rectification under Section 154 of the Act in which, a specific prayer of the assessee was that the expenditure be recognized during the financial year in which the same was made. In view of the above, we hold the application filed by the assessee is maintainable u/s 154 of the Act and restore the issue back to the Assessing Officer to consider the same on merits regarding the quantum of the benefit allowable to the assessee under the second proviso to Section 40(a)(ia) of the Act. 12. Since we have allowed the assessee s claim as above, we do not consider it fit ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
